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e-Commerce Docket Sheet

By ALM Staff | Law Journal Newsletters |
June 28, 2005

Licensor Claims Under Virginia Law
Preempted By Copyright Act

A software licensor's conversion and unjust enrichment claims with respect to unauthorized use of copyrighted software are preempted by the Copyright Act because they contain “no 'extra element' rendering them 'qualitatively different' from a copyright claim.” Microstrategy, Inc., v. Netsolve, Inc., No. 05-334, 2005 U.S. Dist. LEXIS 9145 (E. D. Va. May 13, 2005). The licensor alleged that a software audit revealed that the licensee was exceeding the “named user” and “per CPU” provisions of a license agreement. The court concluded that the licensor's conversion claim based on these facts alleged “mere unauthorized reproduction” of the licensed software, but not the “extra element” of the unlawful retention of a tangible embodiment of the plaintiff's work. Similarly, the court dismissed the licensor's unjust enrichment claim, concluding that the licensor failed to allege that the licensee was unjustly enriched by “material beyond copyright protection.”


Copyright Application Doesn't Support
Federal Court Infringement Action

Filing a copyright registration application does not satisfy the statutory jurisdictional requirement that “preregistration or registration of the copyright claim” precedes the filing of a copyright infringement action. Mays & Associates, Inc. v. Euler, No. RDB 05-437, 2005 U.S. Dist. LEXIS 9454 (D. Md. May 18, 2005). The district court dismissed without prejudice a claim alleging infringement of the plaintiff's Web site design, where the claim was based on an application for registration filed shortly before the action was filed. Noting a split of authority on whether the filing of an application constitutes “registration,” the court commented that the “ordinary, contemporary, and common meaning” of the Copyright Act evidences the intent of Congress to require more than merely an application for copyright registration prior to filing suit.


Copyright Restoration Of Foreign
Works In Public Domain Within Congress' Realm

Congress has the authority under the Copyright and Patent Clause of the U.S. Constitution to restore copyright protection to foreign-authored works that have fallen into the public domain. Luck's Music Library, Inc. v. Gonzales, No. 04-5240 (D.C. Cir. May 24, 2005). The Circuit Court upheld the constitutionality of Sec-tion 514 of the Uruguay Round Agreements Act, codified at 17 U.S.C. Sections 114A, 109, which implements Article 18 of the Berne Convention for the Protection of Literary and Artistic Works. The court rejected the argument that the limitations in the Copyright and Patent Clause prohibit Congress from retroactively restoring copyright in works that have fallen into the public domain.


Equitable Estoppel Bars Infringement
Claims For Web Site Use Of Photos

A freelance news photographer who continued to accept assignments from a newspaper that displayed his work in its print and electronic editions is estopped from claiming that the use of his work in the electronic edition infringed his copyright rights. Dallal v. The New York Times Co., No. 03 Civ. 10065, 2005 U.S. Dist. LEXIS 9321 (S.D.N.Y. May 12, 2005). The court granted the newspaper's motion to dismiss the photographer's copyright infringement claims, concluding that the newspaper had shown the elements necessary for estoppel. The court noted that although the photographer included restrictive rights language in his invoices for the photographs, and although at times he orally objected to the use of the photographs in the electronic version, his continued course of dealing with the newspaper over a 6-year period constituted inaction with respect to his pursuit of a copyright claim.


Public Web Content Not Protected By
Trade Secrets Act And Indiana Law

A trial court erred in enjoining a former employee and competitor from using information on an online retailer's publicly available Web sites on the ground that the material was protected under Indiana trade secret law. Paramanandam v. Herrmann, No. 84A01-0408-CV-345, 2005 Ind. App. LEXIS 891 (Ind. Ct. App. May 24, 2005). The appeals court concluded that the online retailer undertook no efforts to prevent access to or copying of its Web site content or to keep its domain names secret, and so, the retailer failed to establish the necessary secrecy required to support the issuance of an injunction under applicable trade secret law.


Confidential Licensee Royalty Reports
Can't ID Third-Party Buyers
Under Terminated License

In a dispute over a license to manufacture and sell a product, the plaintiff-licensor may not use the defendant-licensee's royalty reports to identify and contact third-party purchaser-resellers with a cease-and-desist letter. Jordan v. Can You Imagine, Inc., No. 04 Civ. 4696, 2005 U.S. Dist. LEXIS 8726 (S.D.N.Y. May 12, 2005). In granting the licensee's request for an injunction against the licensor's use of the royalty reports, the court relied upon a license term requiring the parties to keep the royalty reports confidential. The court also concluded that the licensor would not be harmed by the issuance of the injunction, based upon its representations that it had been sending cease-and-desist letters based upon Internet searches for references to the licensed product. The court declined, based on the lack of proof in the record concerning the respective strength of the parties' claims, to enjoin any party from contacting customers to explain their position with respect to the rights to the licensed product.


Site Traffic Justifies Maximum
Damages For One Pirate Device

An award of maximum statutory damages of $100,000 for sale of a single device for unauthorized decryption of satellite cable programming signals is supported in part by evidence showing a large number of visitors to the seller's Web site. DirecTV v. Hughes, No. 5:03-CV-148, 2005 U.S. Dist. LEXIS 9213 (W.D. Mich. May 17, 2005). The court concluded that although the plaintiff had proved only one sale of a pirate device to an investigator, it was “reasonable to conclude … that there were numerous violations” based upon the number of Web site visits. In assessing damages, the court also relied upon the conclusion that the seller violated the anti-piracy provision of the Cable Act knowingly, and upon evidence showing that the plaintiff incurred significant expense and expended significant resources in combating privacy.


Use Of Trademark In Domain Name To
Disparage Owner Actionable Under Lanham Act

The use of a condominium association's trade name and service mark in a domain name used to disparage the condominium board constitutes a commercial use of the mark that is actionable under the Lanham Act. Board of Directors of Sapphire Bay Condos v. Simpson, No. 04-3690 (3d Cir. Apr. 20, 2005) (unpublished). The appeals court upheld the trial court's conclusion that the use of the mark “in luring individuals to his site to disparage the board” diluted the mark by lessening the capacity of the mark to identify and distinguish the board's services. The appeals court affirmed the issuance of an injunction directing transfer of the domain names incorporating the mark and enjoining further use of the mark or any derivatives of the mark.


Forum Selection Clause In
Non-Disclosure Pact Governs Forum

A forum selection clause in a non-disclosure agreement is enforceable with respect to patent infringement litigation where the rights of litigants in the underlying patent are governed by the non-disclosure agreement. Cuno, Inc. v. Hayward Industrial Products, Inc., No. 03 Civ. 3076, 2005 U.S. Dist. LEXIS 8886 (S.D.N.Y. May 11, 2005). The court noted that the inventor and the alleged infringer relied on the non-disclosure agreement and a subsequent addendum in asserting their rights to the disputed invention. The court found that the forum selection clause was broadly written, encompassing “any actions, claims or lawsuits … arising out of or relating to” the agreement, and thus claims beyond breach of the agreement were governed by the clause.


Airline's Disclosure Of Confidential
Passenger Data isn't ECPA Violation

Allegations that electronic records of an airline's passenger names were disclosed to research companies working for the Transportation Security Administration without the passengers' authorization do not state a cause of action under the Electronic Communications Privacy Act (ECPA). In re American Airlines, Inc., Privacy Litigation, No. 03:04-MD-1627-D, 2005 U.S. Dist. LEXIS 10278 (N.D. Tex. May 25, 2005). The court ruled that ECPA Section 2701 covers claims that a party exceeded its authorization to access the electronic records at issue, but does not cover claims of unauthorized disclosure of the records to third parties. The court also rejected the passengers' claims that disclosure violated ECPA Section 2702 because it was contrary to the airline's privacy policy, holding that even if the airline's disclosure violated its privacy policy, that breach did not deprive the airline of its legal capacity to consent to disclosure of the records under ECPA. Although the court dismissed most of the passengers' state law claims on the ground that they were preempted by the Airline Deregu-lation Act, the court ruled that the breach of contract claims against the airline for violation of its privacy policy could be re-pleaded.


Under NY Law, Online Game Buyer
Must Pay Full Damages

Under New York law, a party that repudiated an agreement to purchase a video game Web site is obligated to pay the full, agreed-upon purchase price as part of a damages award for the breach, even though the seller was excused from its obligation to convey the Web site. Atari, Inc. v. Games, Inc., No. 04 Civ. 3723, 2005 U.S. Dist. LEXIS 8129 (S.D.N.Y. May 4, 2005). The court rejected the purchaser's argument that requiring full payment, even though the Web site ?? was not conveyed, constituted a windfall for the seller and amounted to an unenforceable liquidated damages provision.


Good Faith Differences Of Opinion On
Privileged e-Mails Shouldn't Result
In Discovery Sanctions

The opinion differences between parties concerning whether documents, including e-mail to in-house counsel, were protected by the attorney-client privilege, should not result in the imposition of discovery sanctions. American National Bank and Trust Co. of Chicago v. Equitable Life Assurance Society of The United States, No. 04-2992 (7th Cir. May 4, 2005). The appeals court reversed a trial court that struck the defendant's entire privilege log and ordered documents previously found to be protected by attorney-client privilege to be turned over to the plaintiff as a sanction for bad faith conduct. The appeals court noted that distinguishing between in-house counsels' protected legal advice and their non-protected business advice is a particularly difficult area of privilege law, and it is expected that parties and their attorneys will “zealously” seek to protect documents that they believe in good faith are within the attorney-client privilege.


e-Mail Change Notice Not Binding
If e-Mail Not Usual Method

A company-wide e-mail containing hyperlinks to the company's new dispute resolution policy is not sufficient to put employees on notice of the new policy, where e-mail is not a “traditional means” of conveying contractually binding employment terms. Campbell v. General Dynamics Government Systems Corp., No. 04-1828, 2005 U.S. App. LEXIS 9360 (1st Cir. May 23, 2005). The appeals court upheld the lower court's refusal to order arbitration of an employment discrimination dispute, where the employer sent a companywide e-mail advising employees of its dispute resolution policy, and included links to the text of the policy at the foot of the e-mail. The court ruled that although a blanket rule precluding the use of e-mail would be inappropriate and undesirable (and probably would violate the federal electronic signatures act), the e-mail communication was not sufficient “to put a reasonable employee on inquiry notice of an alteration to the contractual aspects of the employment relationship.”


Washington State Enacts
Anti-Spyware Bill

The legislation was signed into law in May, and was scheduled to become effective on July 24. H.B. 1012 (May 17, 2005). Among other things, the bill makes it unlawful to transmit software by deceptive means that changes the Web browser or security settings on a user's computer, or that installs tracking or information-gathering software such as a “keystroke logger” on a user's computer. The legislation also makes it unlawful to block the removal of such software. Also prohibited is the deceptive installation of software that changes the user's means of access to the Internet and either causes damages or results in financial charges for services that the user didn't authorize. It is also unlawful under the legislation to induce a user to install software by intentionally misrepresenting that it is needed to view certain content. The legislation includes exceptions for security and monitoring software, technical support, authorized updates, remote system management, and similar functions.


Evidence On Lost Revenue And Cost
Of Repair Admissible In State
Computer Crime Prosecution

In a criminal prosecution under Michigan law for unauthorized access to a computer network, the trial court properly admitted evidence establishing the cost of restoring the damaged network, as well as the amount of lost revenue attributable to the damage. People v. Schilke, No. 253117 (Mich. Ct. App., May 3, 2005) (unpublished). The appeals court upheld the trial court rejection of the argument that evidence of the amount of damages was unnecessary because the question of damages was not an essential element of the crime, and that the prejudicial effect outweighed the probative value of the evidence.


Broadcast Flag Rule Exceeds
FCC Regulatory Authority

The Federal Communications Commission (FCC) did not have authority to issue the Broadcast Flag Rule, a regulation that would require digital television receivers manufactured after July 1, to include technology recognizing a digital code designed to prevent unauthorized redistribution of broadcast content. American Library Association v. FCC, No. 04-1037 (D.C. Cir. May 6, 2005). The Circuit Court concluded that while the statutory authority Congress delegated to the FCC “plainly encompasses” the regulation of technology that can receive television broadcast content, the agency may regulate such technology only while that technology is engaged in the process of receiving a television broadcast. The Broadcast Flag Rule, the court concluded, sought to regulate the operation of television receivers after the completion of a transmission.


Web Bookseller's Returns Via Physical
Affiliate Allows For CA Use Tax

An online bookseller headquartered in Michigan must pay California use tax on its sales to California purchasers where its return policy allowed purchasers to return books and receive credit at bookstores stores in California that were operated by its affiliated company. Borders Online, LLC v. State Board of Equalization, No. A105488, 2005 Cal. App. LEXIS 875 (Cal. Ct. App., 1st Dist. May 31, 2005). The appeals court upheld the trial court's conclusion that in accepting the returns, the affiliated company acted as the agent or representative of the online company in California, thus subjecting the online bookseller to the California tax. The appeals court also upheld the trial court's conclusion that by providing returns and exchange under the policy, the online bookseller was “selling” within the meaning of the tax statute, because that term encompasses “all activities that constitute an integral part of inducing sales.”


Data Security Breach Legislation
Keeps Advancing In States

Legislation that requires companies that handle personal information to notify consumers of security breaches has passed the legislatures in Florida and Illinois. Florida HB 481 was presented to the governor on June 6; Illinois HB 1633, the “Personal Information Protection Act,” passed both houses on May 16. Both bills are similar to the California data security-breach notification law that became effective in that state in 2003 and that has been the model for enactments in five other states within the last several months.


Docket Sheet is written by Julian S. Millstein, Edward A. Pisacreta and Jeffrey D. Neuburger, partners in the New York office of Brown Raysman Millstein Felder & Steiner LLP.


Licensor Claims Under Virginia Law
Preempted By Copyright Act

A software licensor's conversion and unjust enrichment claims with respect to unauthorized use of copyrighted software are preempted by the Copyright Act because they contain “no 'extra element' rendering them 'qualitatively different' from a copyright claim.” Microstrategy, Inc., v. Netsolve, Inc., No. 05-334, 2005 U.S. Dist. LEXIS 9145 (E. D. Va. May 13, 2005). The licensor alleged that a software audit revealed that the licensee was exceeding the “named user” and “per CPU” provisions of a license agreement. The court concluded that the licensor's conversion claim based on these facts alleged “mere unauthorized reproduction” of the licensed software, but not the “extra element” of the unlawful retention of a tangible embodiment of the plaintiff's work. Similarly, the court dismissed the licensor's unjust enrichment claim, concluding that the licensor failed to allege that the licensee was unjustly enriched by “material beyond copyright protection.”


Copyright Application Doesn't Support
Federal Court Infringement Action

Filing a copyright registration application does not satisfy the statutory jurisdictional requirement that “preregistration or registration of the copyright claim” precedes the filing of a copyright infringement action. Mays & Associates, Inc. v. Euler, No. RDB 05-437, 2005 U.S. Dist. LEXIS 9454 (D. Md. May 18, 2005). The district court dismissed without prejudice a claim alleging infringement of the plaintiff's Web site design, where the claim was based on an application for registration filed shortly before the action was filed. Noting a split of authority on whether the filing of an application constitutes “registration,” the court commented that the “ordinary, contemporary, and common meaning” of the Copyright Act evidences the intent of Congress to require more than merely an application for copyright registration prior to filing suit.


Copyright Restoration Of Foreign
Works In Public Domain Within Congress' Realm

Congress has the authority under the Copyright and Patent Clause of the U.S. Constitution to restore copyright protection to foreign-authored works that have fallen into the public domain. Luck's Music Library, Inc. v. Gonzales, No. 04-5240 (D.C. Cir. May 24, 2005). The Circuit Court upheld the constitutionality of Sec-tion 514 of the Uruguay Round Agreements Act, codified at 17 U.S.C. Sections 114A, 109, which implements Article 18 of the Berne Convention for the Protection of Literary and Artistic Works. The court rejected the argument that the limitations in the Copyright and Patent Clause prohibit Congress from retroactively restoring copyright in works that have fallen into the public domain.


Equitable Estoppel Bars Infringement
Claims For Web Site Use Of Photos

A freelance news photographer who continued to accept assignments from a newspaper that displayed his work in its print and electronic editions is estopped from claiming that the use of his work in the electronic edition infringed his copyright rights. Dallal v. The New York Times Co., No. 03 Civ. 10065, 2005 U.S. Dist. LEXIS 9321 (S.D.N.Y. May 12, 2005). The court granted the newspaper's motion to dismiss the photographer's copyright infringement claims, concluding that the newspaper had shown the elements necessary for estoppel. The court noted that although the photographer included restrictive rights language in his invoices for the photographs, and although at times he orally objected to the use of the photographs in the electronic version, his continued course of dealing with the newspaper over a 6-year period constituted inaction with respect to his pursuit of a copyright claim.


Public Web Content Not Protected By
Trade Secrets Act And Indiana Law

A trial court erred in enjoining a former employee and competitor from using information on an online retailer's publicly available Web sites on the ground that the material was protected under Indiana trade secret law. Paramanandam v. Herrmann, No. 84A01-0408-CV-345, 2005 Ind. App. LEXIS 891 (Ind. Ct. App. May 24, 2005). The appeals court concluded that the online retailer undertook no efforts to prevent access to or copying of its Web site content or to keep its domain names secret, and so, the retailer failed to establish the necessary secrecy required to support the issuance of an injunction under applicable trade secret law.


Confidential Licensee Royalty Reports
Can't ID Third-Party Buyers
Under Terminated License

In a dispute over a license to manufacture and sell a product, the plaintiff-licensor may not use the defendant-licensee's royalty reports to identify and contact third-party purchaser-resellers with a cease-and-desist letter. Jordan v. Can You Imagine, Inc., No. 04 Civ. 4696, 2005 U.S. Dist. LEXIS 8726 (S.D.N.Y. May 12, 2005). In granting the licensee's request for an injunction against the licensor's use of the royalty reports, the court relied upon a license term requiring the parties to keep the royalty reports confidential. The court also concluded that the licensor would not be harmed by the issuance of the injunction, based upon its representations that it had been sending cease-and-desist letters based upon Internet searches for references to the licensed product. The court declined, based on the lack of proof in the record concerning the respective strength of the parties' claims, to enjoin any party from contacting customers to explain their position with respect to the rights to the licensed product.


Site Traffic Justifies Maximum
Damages For One Pirate Device

An award of maximum statutory damages of $100,000 for sale of a single device for unauthorized decryption of satellite cable programming signals is supported in part by evidence showing a large number of visitors to the seller's Web site. DirecTV v. Hughes, No. 5:03-CV-148, 2005 U.S. Dist. LEXIS 9213 (W.D. Mich. May 17, 2005). The court concluded that although the plaintiff had proved only one sale of a pirate device to an investigator, it was “reasonable to conclude … that there were numerous violations” based upon the number of Web site visits. In assessing damages, the court also relied upon the conclusion that the seller violated the anti-piracy provision of the Cable Act knowingly, and upon evidence showing that the plaintiff incurred significant expense and expended significant resources in combating privacy.


Use Of Trademark In Domain Name To
Disparage Owner Actionable Under Lanham Act

The use of a condominium association's trade name and service mark in a domain name used to disparage the condominium board constitutes a commercial use of the mark that is actionable under the Lanham Act. Board of Directors of Sapphire Bay Condos v. Simpson, No. 04-3690 (3d Cir. Apr. 20, 2005) (unpublished). The appeals court upheld the trial court's conclusion that the use of the mark “in luring individuals to his site to disparage the board” diluted the mark by lessening the capacity of the mark to identify and distinguish the board's services. The appeals court affirmed the issuance of an injunction directing transfer of the domain names incorporating the mark and enjoining further use of the mark or any derivatives of the mark.


Forum Selection Clause In
Non-Disclosure Pact Governs Forum

A forum selection clause in a non-disclosure agreement is enforceable with respect to patent infringement litigation where the rights of litigants in the underlying patent are governed by the non-disclosure agreement. Cuno, Inc. v. Hayward Industrial Products, Inc., No. 03 Civ. 3076, 2005 U.S. Dist. LEXIS 8886 (S.D.N.Y. May 11, 2005). The court noted that the inventor and the alleged infringer relied on the non-disclosure agreement and a subsequent addendum in asserting their rights to the disputed invention. The court found that the forum selection clause was broadly written, encompassing “any actions, claims or lawsuits … arising out of or relating to” the agreement, and thus claims beyond breach of the agreement were governed by the clause.


Airline's Disclosure Of Confidential
Passenger Data isn't ECPA Violation

Allegations that electronic records of an airline's passenger names were disclosed to research companies working for the Transportation Security Administration without the passengers' authorization do not state a cause of action under the Electronic Communications Privacy Act (ECPA). In re American Airlines, Inc., Privacy Litigation, No. 03:04-MD-1627-D, 2005 U.S. Dist. LEXIS 10278 (N.D. Tex. May 25, 2005). The court ruled that ECPA Section 2701 covers claims that a party exceeded its authorization to access the electronic records at issue, but does not cover claims of unauthorized disclosure of the records to third parties. The court also rejected the passengers' claims that disclosure violated ECPA Section 2702 because it was contrary to the airline's privacy policy, holding that even if the airline's disclosure violated its privacy policy, that breach did not deprive the airline of its legal capacity to consent to disclosure of the records under ECPA. Although the court dismissed most of the passengers' state law claims on the ground that they were preempted by the Airline Deregu-lation Act, the court ruled that the breach of contract claims against the airline for violation of its privacy policy could be re-pleaded.


Under NY Law, Online Game Buyer
Must Pay Full Damages

Under New York law, a party that repudiated an agreement to purchase a video game Web site is obligated to pay the full, agreed-upon purchase price as part of a damages award for the breach, even though the seller was excused from its obligation to convey the Web site. Atari, Inc. v. Games, Inc., No. 04 Civ. 3723, 2005 U.S. Dist. LEXIS 8129 (S.D.N.Y. May 4, 2005). The court rejected the purchaser's argument that requiring full payment, even though the Web site ?? was not conveyed, constituted a windfall for the seller and amounted to an unenforceable liquidated damages provision.


Good Faith Differences Of Opinion On
Privileged e-Mails Shouldn't Result
In Discovery Sanctions

The opinion differences between parties concerning whether documents, including e-mail to in-house counsel, were protected by the attorney-client privilege, should not result in the imposition of discovery sanctions. American National Bank and Trust Co. of Chicago v. Equitable Life Assurance Society of The United States, No. 04-2992 (7th Cir. May 4, 2005). The appeals court reversed a trial court that struck the defendant's entire privilege log and ordered documents previously found to be protected by attorney-client privilege to be turned over to the plaintiff as a sanction for bad faith conduct. The appeals court noted that distinguishing between in-house counsels' protected legal advice and their non-protected business advice is a particularly difficult area of privilege law, and it is expected that parties and their attorneys will “zealously” seek to protect documents that they believe in good faith are within the attorney-client privilege.


e-Mail Change Notice Not Binding
If e-Mail Not Usual Method

A company-wide e-mail containing hyperlinks to the company's new dispute resolution policy is not sufficient to put employees on notice of the new policy, where e-mail is not a “traditional means” of conveying contractually binding employment terms. Campbell v. General Dynamics Government Systems Corp., No. 04-1828, 2005 U.S. App. LEXIS 9360 (1st Cir. May 23, 2005). The appeals court upheld the lower court's refusal to order arbitration of an employment discrimination dispute, where the employer sent a companywide e-mail advising employees of its dispute resolution policy, and included links to the text of the policy at the foot of the e-mail. The court ruled that although a blanket rule precluding the use of e-mail would be inappropriate and undesirable (and probably would violate the federal electronic signatures act), the e-mail communication was not sufficient “to put a reasonable employee on inquiry notice of an alteration to the contractual aspects of the employment relationship.”


Washington State Enacts
Anti-Spyware Bill

The legislation was signed into law in May, and was scheduled to become effective on July 24. H.B. 1012 (May 17, 2005). Among other things, the bill makes it unlawful to transmit software by deceptive means that changes the Web browser or security settings on a user's computer, or that installs tracking or information-gathering software such as a “keystroke logger” on a user's computer. The legislation also makes it unlawful to block the removal of such software. Also prohibited is the deceptive installation of software that changes the user's means of access to the Internet and either causes damages or results in financial charges for services that the user didn't authorize. It is also unlawful under the legislation to induce a user to install software by intentionally misrepresenting that it is needed to view certain content. The legislation includes exceptions for security and monitoring software, technical support, authorized updates, remote system management, and similar functions.


Evidence On Lost Revenue And Cost
Of Repair Admissible In State
Computer Crime Prosecution

In a criminal prosecution under Michigan law for unauthorized access to a computer network, the trial court properly admitted evidence establishing the cost of restoring the damaged network, as well as the amount of lost revenue attributable to the damage. People v. Schilke, No. 253117 (Mich. Ct. App., May 3, 2005) (unpublished). The appeals court upheld the trial court rejection of the argument that evidence of the amount of damages was unnecessary because the question of damages was not an essential element of the crime, and that the prejudicial effect outweighed the probative value of the evidence.


Broadcast Flag Rule Exceeds
FCC Regulatory Authority

The Federal Communications Commission (FCC) did not have authority to issue the Broadcast Flag Rule, a regulation that would require digital television receivers manufactured after July 1, to include technology recognizing a digital code designed to prevent unauthorized redistribution of broadcast content. American Library Association v. FCC, No. 04-1037 (D.C. Cir. May 6, 2005). The Circuit Court concluded that while the statutory authority Congress delegated to the FCC “plainly encompasses” the regulation of technology that can receive television broadcast content, the agency may regulate such technology only while that technology is engaged in the process of receiving a television broadcast. The Broadcast Flag Rule, the court concluded, sought to regulate the operation of television receivers after the completion of a transmission.


Web Bookseller's Returns Via Physical
Affiliate Allows For CA Use Tax

An online bookseller headquartered in Michigan must pay California use tax on its sales to California purchasers where its return policy allowed purchasers to return books and receive credit at bookstores stores in California that were operated by its affiliated company. Borders Online, LLC v. State Board of Equalization, No. A105488, 2005 Cal. App. LEXIS 875 (Cal. Ct. App., 1st Dist. May 31, 2005). The appeals court upheld the trial court's conclusion that in accepting the returns, the affiliated company acted as the agent or representative of the online company in California, thus subjecting the online bookseller to the California tax. The appeals court also upheld the trial court's conclusion that by providing returns and exchange under the policy, the online bookseller was “selling” within the meaning of the tax statute, because that term encompasses “all activities that constitute an integral part of inducing sales.”


Data Security Breach Legislation
Keeps Advancing In States

Legislation that requires companies that handle personal information to notify consumers of security breaches has passed the legislatures in Florida and Illinois. Florida HB 481 was presented to the governor on June 6; Illinois HB 1633, the “Personal Information Protection Act,” passed both houses on May 16. Both bills are similar to the California data security-breach notification law that became effective in that state in 2003 and that has been the model for enactments in five other states within the last several months.


Docket Sheet is written by Julian S. Millstein, Edward A. Pisacreta and Jeffrey D. Neuburger, partners in the New York office of Brown Raysman Millstein Felder & Steiner LLP.

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